In its most basic form, affiliate marketing is a reward system used by many e-commerce brands and businesses that acknowledge customers who have been sent to them via a third party. In exchange for directing purchasers to them, the merchant then shares a percentage of that sale with the referrer.
Affiliate links are abundant throughout the Internet. In fact, it’s likely you’re clicking affiliate links every day without realizing it because the very best affiliate networks provide a seamless, behind-the-scenes transition from host page -> affiliate tracking server -> storefront. Shopping and coupon sites, social media pages, musician websites, online ads, and, more recently, mobile apps are all suitable homes for affiliate links.
To be an expert on affiliate marketing (also known as Cost Per Action marketing or Performance Marketing, though some believe there are subtle differences), it helps to be familiar with the key players and understand the relationship between their respective roles in the process:
The Customer is you, or me, or any John Doe with an Internet connection, who likes to peruse the web in search of their favorite products and offerings that can be purchased online.
The Merchant is a brand, retailer or business who hosts an e-commerce storefront and receives customers coming on his or her own initiative, as well as customers referred from a publisher. iTunes and Amazon are two examples of major international retailers who run their own affiliate programs.
The Publisher, or referrer, can be any third party with an online presence (website owner, blogger, app developer, email marketer, etc.) who hosts a promotion, advertisement or otherwise normal link to a merchant’s store. In the case of affiliate marketing, that link also includes a little something extra in the form of affiliate technology. Among other things, that extra affiliate information is later used to reward the publisher for some or all of the purchases made by a referred source.
The Affiliate Network is the nerdy “monkey in the middle” between merchant and affiliate. The network is responsible for the backstage engineering work that allows millions of clicks around the world to be quickly and correctly translated and routed without you, the customer, being any the wiser. (The really, really good networks *hint, hint* also provide cool additional features like advanced tracking and reporting that allow for optimization and highly targeted affiliate campaigns.)
Across the wide spectrum of brands and networks that utilize affiliate marketing, there are slight variations in everything from rewards to guidelines, to payment models. For example, one merchant might reward an affiliate for every purchase a referred customer makes, while another might reward the affiliate on a one-time basis and yet another might administer commissions on all purchases made within a specific window of time.
Regardless of these differences, affiliate marketing is becoming predominant in online advertising because it’s an efficient model (compared to buying ads by the impression or click). Merchants are happy to devote a small portion of their earnings if it means they are receiving additional customers with minimum risk. On the flip side, publishers have a tremendous opportunity for opening an additional revenue stream of affiliate commissions.
Clothes, apps, books, music, games (the virtual kind, as well as that vintage 1950’s Monopoly set you’ve been scouring the web in search of), and more can all be purchased online. And where there’s an opportunity for an online purchase, there’s an affiliate opportunity.